Auto Maker, Retiree Trust Engage in Game of Chicken to Settle Valuation

Chrysler Group LLC is gearing up for an initial public offering, but listing shares is just one avenue—and the least preferred—that Chief Executive Sergio Marchionne could take as he tries to meld the No. 3 U.S. auto maker with Italy's Fiat SpA.

Mr. Marchionne, who is also CEO of Fiat, is lining up advisers, including former Obama administration auto czar Ron Bloom, to help reach a private buyout agreement with Chrysler's sole...